Reports have suggested that the head of the VW brand is considering closing its Brussels plant. The scaling down of the carmaker's western European plants, followed by relocation in countries with lower labour costs, is vital to VW's future survival. However a local backlash over the Belgian closure could do VW's image further harm at an already difficult time.

The head of the loss-making VW brand, Wolfgang Bernhard, is considering the closure of its Brussels factory in an effort to cut costs, according to the Financial Times. The Brussels plant employs around 5,700 people and produced 184,000 cars last year, most of which were Golf hatchbacks. The news will certainly not be welcomed by Belgian workers, many of whom will recall the closure of Renault's plant in Vilvoorde in the mid 1990s, which resulted in the loss of 3,000 jobs.

News of the closures comes at a turbulent time for the company, which has seen several changes at management level. Various senior executives resigned last week following allegations of misuse of company funds. The last thing VW needs is another high profile episode with potentially damaging repercussions. One need only look at the fallout from the collapse of the MG Rover factory in the UK to see how emotive auto plant closures can prove.

The prospect of producing vehicles abroad is not a new one for VW. The company has successful operations in the Czech Republic and unveiled plans to open a manufacturing operation in Moscow at the end of last year. However, company management are no doubt calculating that a plant closure in Belgium would be politically easier and inflict less damage on the brand than a plant closure in Germany.

It is largely inevitable that more factories in western Europe, be they in Germany Belgium or elsewhere, will be closed to make way for increased production in low wage countries. Such closures are vital to the survival of large European carmakers. However, it is essential for VW not to botch this factory closure, as Renault did with its Belgian plant. A carefully considered and sensitive plant closure will leave VW better equipped to compete in the world market and leave its brand image intact.

Automakers in Belgium (purchase report)

SOURCE: DATAMONITOR COMMENTWIRE (c) 2005 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.

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